CRS Updates in Hong Kong

Hong Kong, 15 December 2016

The Hong Kong Inland Revenue Department (“IRD”) has recently signed bilateral competent authority agreements (“CAAs”) with Japan and the United Kingdom to commence automatic exchange of financial account information in tax matters (“AEOI”) under Common Reporting Standard (“CRS”). AEOI under CRS with these two jurisdictions will commence since 2018 with respect to the 2017 account information.

The Secretary for Financial Services and the Treasury has made a Notice to put these two jurisdictions into a list of “reporting jurisdictions” under the Inland Revenue Ordinance (“IRO”). The Notice also puts a list of “participating jurisdictions” under the IRO, which includes all jurisdictions committed to adopting AEOI by 2018, i.e. 100 jurisdictions excluding Hong Kong. The Notice was published in the Gazette on October 28, 2016, and tabled at the Legislative Council at its sitting for negative vetting on November 2, 2016. The relevant provisions will come into operation on December 31, 2016.

These are the necessary steps that Hong Kong has to take in order to automatically exchange financial account information with a tax jurisdiction under CRS. Apart from putting in place a comprehensive avoidance of double taxation agreement (“CDTA”)[1] or a tax information exchange agreement (“TIEA”), and amending the IRO to put in place a legislative framework for Hong Kong to implement AEOI on June 30, 2016, Hong Kong needs to sign a CAA with the tax jurisdiction that Hong Kong would like to implement AEOI. The name of that jurisdiction will need to be added to the list of “reportable jurisdicions” in the IRO by means of a Notice published in the Gazette. The Notice is subject to negative vetting by the Legislative Council and the jurisdiction will become a “reportable jurisdiction” after the Notice has come to effect.

Therefore, out of the 100 participating jurisdictions, Hong Kong, at the current stage, could only automatically exchange financial account information under CRS with Japan and the United Kingdom, the jurisdictions which Hong Kong has signed a CDTA or TIEA and with which it has entered into a CAA.

The Hong Kong government has emphasized its intention to expand Hong Kong’s network of AEOI with partners with which Hong Kong has signed a CDTA or a TIEA. The Hong Kong government will commence AEOI discussions with all other CDTA/TIEA partners committed to adopting AEOI, and target to conclude as many CAAs as practicable in 2017.

Our previous tax newsletter on the AEOI developments in Hong Kong can be accessed below: